Overlooked by most major print and broadcast media in the pre-Christmas rush to report a stack of negative news ranging from lower retail sales to severe weather, was a bit of positive news affecting millions of retirees: Suspension of annual required minimum distributions (RMDs) from individual retirement accounts (IRAs), 401(k)s and other tax-deferred plans, observes Grumpy Editor.
President Bush signed legislation last Tuesday that suspends the rule --- for 2009, not 2008.
As Grumpy Editor asked in a Nov. 14 posting that focused on retirees being socked by RMDs based on 2007 stock values: But will Congress act? And in time?
The good news is that Congress did act. The bad news is lawmakers, late in the year, were looking at the 2009 calendar. It had been hoped for a RMD suspension for 2008.
This year’s unusual problem is that RMD amounts are based on the total dollar value in accounts on Dec. 31 of the prior year. Thus, calculations for 2008 stem from a much higher stock market at year-end 2007, well before this year’s collapse. That means retirees, already squeezed on many fronts, are getting stiffed.
RMDs are an annual ritual that require holders, after reaching 70.5 years old, to withdraw a percentage of funds from their accounts. The action usually occurs in November or December. Distribution requirements are based on age and life expectancy of account holders.
Thus, seniors are still required to take 2008 withdrawals from beaten-down retirement accounts by tomorrow or face a stiff penalty.